CO2 offsetting surges in the EU

Carbon offsetting by companies in the EU grew by 85% last year, according to new research.

The companies policed by the EU's Emissions Trading Scheme (ETS) submitted a total of 254 million credits to offset 13% of their carbon emissions.

However, according to the research carried out by environmental campaign group Sandbag, the vast majority of these offset credits were due to be banned from the scheme in 2013.

The EU ETS has been "overwhelmed" with spare European allowances since 2009 when emissions plummeted below the level of the cap, and this has led to very low carbon prices, the research claims.

In 2011, emissions were still 9% below the cap while a further 13% of emissions were unnecessarily offset, releasing more spare allowances into an "already long market".

Commenting on the data, policy officer for Sandbag, Rob Elsworth, said: "Offsetting was supposed to be a price containment measure to ensure carbon prices didn't rise too high, but carbon prices have remained low due to excess supply in the market.

"Offsets are contributing significantly to this oversupply and are now depressing prices so low that the EU ETS almost ceases to have a function. Europe can afford to be much more selective in the offsets it allows and must now increase its climate ambition," he added.

On Wednesday, the European Commission published a report containing six potential options to fix the "broken" trading scheme. These include proposals to further restrict access to international offsets and to increase the overall ambition of the scheme.

Commenting on the proposals, the European Wind Energy Association (EWEA) said the Commission's structural measures are urgently needed to stop the massive oversupply of emission allowances and to re-establish confidence in the EU ETS.

It added that the proposal for so-called "backloading" of emission allowances "is a necessary first step, but will only delay and not solve the structural problem of oversupply in the ETS".

Head of regulatory affairs at the European Wind Energy Association in Brussels (EWEA), Stephane Bourgeois, said: "The key is for supply to be reduced before 2020. The EU cannot afford to wait until 2025 for the carbon market to give signals to investors in the power sector.

"A 2030 solution to fix the ETS should only be considered if it includes an increase in the 2020 target, and as part of a package with an ambitious 2030 target for renewable energy to continue driving investments in a broad range of renewable energy technologies post-2020", added Bourgeois.